A certified financial analyst ensuring the accuracy of complex financial models.
Welcome to the **FatFIRE Calculator**. Use this advanced tool to estimate the time required to reach your high-net-worth financial independence goal. By inputting your current savings, contributions, expected returns, and desired annual expenses, you can accurately forecast your freedom date.
FatFIRE Calculator
FatFIRE Calculator Formula
The calculator determines the required Target Portfolio Value ($FV$) first, and then solves for the time ($N$) it takes to reach that value using a variation of the Future Value of Annuity formula.
Target Portfolio ($FV$) $= \frac{\text{Annual Expenses} (E)}{\text{Safe Withdrawal Rate} (SWR)}$
$FV = P(1+R)^N + A \left[ \frac{(1+R)^N – 1}{R} \right]$
Variables Explained
- Current Portfolio Value (P): The total value of your investment accounts today.
- Annual Contribution (A): The fixed amount you plan to invest annually.
- Net Annual Return (R): The estimated annualized return percentage after accounting for inflation and investment fees.
- Desired Annual Expenses (E): The annual spending required to maintain your high-net-worth (FatFIRE) lifestyle.
- Safe Withdrawal Rate (SWR): The percentage of your portfolio you plan to withdraw annually in retirement (often 3% to 4% for FIRE, lower for FatFIRE).
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What is FatFIRE Calculator?
The term **FatFIRE** refers to achieving Financial Independence with a large enough portfolio to support a significantly luxurious or high-spending lifestyle. While the traditional FIRE movement aims for $1 million to $2 million, FatFIRE often implies a portfolio of $5 million, $10 million, or more, supporting annual expenses well over $100,000.
This calculator specifically models the variables critical to the FatFIRE journey: high desired expenses (E) and often a more conservative Safe Withdrawal Rate (SWR) to maximize portfolio longevity. It helps users visualize the trade-offs between higher contributions and expected market returns to hit their substantial financial target.
How to Calculate FatFIRE (Example)
- Determine Target Portfolio ($FV$): User desires $150,000 in annual expenses (E) and plans for a 3.0% SWR. Target $FV = \$150,000 / 0.03 = \$5,000,000$.
- Set Variables: Current Portfolio ($P$) is \$500,000. Annual Contribution ($A$) is \$60,000. Net Annual Return ($R$) is 7.0%.
- Solve for Years ($N$): The calculation then uses the Future Value formula, often solved iteratively or logarithmically, to find that it will take approximately 18.2 years to reach the \$5,000,000 target.
- Verify Consistency: If $N$ was provided (e.g., 20 years), the calculator would solve for the required Annual Contribution ($A$) or another missing variable to achieve the target.
Frequently Asked Questions (FAQ)
1. Why is the Safe Withdrawal Rate (SWR) lower for FatFIRE?
For FatFIRE, individuals often choose a more conservative SWR (e.g., 3.0% instead of 4.0%) to increase the probability of their very large portfolio lasting indefinitely, providing extra security against market downturns and sequence-of-returns risk.
2. Does the Net Annual Return (R) account for inflation?
Yes. The $R$ input should represent your **real** return, meaning the expected portfolio growth rate *minus* the expected long-term inflation rate. This ensures the results are calculated in today’s dollars.
3. What is the minimum FatFIRE target portfolio size?
There is no fixed minimum, but a portfolio supporting annual expenses of $100,000 to $150,000 (equating to \$3.3 million to \$5 million at a 3% SWR) is generally considered the entry point for the FatFIRE category.
4. Can this calculator solve for my required Annual Contribution?
Yes, if you input your desired target value, current portfolio, rate, and a specific time horizon (Years to Target), the calculator can determine the minimum Annual Contribution required to achieve that goal.